Independent Contractor ABC Test
Employment Relationships, Independent Contractors
The ABC test requires a worker be classified as an employee unless:
(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
(B) the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) the worker is customarily engaged in an independently established trade, occupation, or business.
People v. Superior Court (Cal Cartage Transportation Express, LLC), 57 Cal. App. 5th 619
Part A of ABC Test
Part A of the ABC test refines the right to control test. Under part A, a court determines whether class certification is appropriate by examining whether there is common proof of a hirer’s right to control that would permit resolution of the misclassification issue on a class-wide basis. The primary focus is not on the scope of actual control exercised by a business over the precise manner or details of the work performed, but on the broader question of the degree to which the hirer legally has retained, either as a matter of contractual right or in actual practice, the right of necessary control over the work, and the extent to which that scope of control—whatever it is—is subject to common proof. Gonzales v. San Gabriel Transit, Inc., 40 Cal. App. 5th 1131
Part B of ABC Test
Part B of the ABC test requires a business to demonstrate that the worker performs work that is outside the usual course of the hiring entity’s business. This part of the test seeks to bring within the employee category all individuals who can reasonably be viewed as working in the hiring entity’s business, that is, all individuals who are reasonably viewed as providing services to the business in a role comparable to that of an employee, rather than in a role comparable to that of a traditional independent contractor. The focus is not on the label attached to a worker’s position, but on how that individual’s job may reasonably be viewed. Workers whose roles are most clearly comparable to those of employees include individuals whose services are provided within the usual course of the business of the entity for which the work is performed and thus who would ordinarily be viewed by others as working in the hiring entity’s business and not as working, instead, in the worker’s own independent business. An employer fails to make the necessary showing under prong B if a court finds that the work performed is not merely incidental to the company’s business, but rather, is an integral part of that business. Gonzales v. San Gabriel Transit, Inc., 40 Cal. App. 5th 1131
Scope & Definitions, Definition of Employ
The ABC test presumptively considers all workers to be employees, and permits workers to be classified as independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three conditions:
(a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
(b) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903.
In order to establish that a worker is an independent contractor under the ABC standard, the hiring entity is required to establish the existence of each of the three parts of the ABC standard. Furthermore, inasmuch as a hiring entity’s failure to satisfy any one of the three parts itself establishes that the worker should be treated as an employee for purposes of the wage order, a court is free to consider the separate parts of the ABC standard in whatever order it chooses. Because in many cases it may be easier and clearer for a court to determine whether or not part B or part C of the ABC standard has been satisfied than for the court to resolve questions regarding the nature or degree of a worker’s freedom from the hiring entity’s control for purposes of part A of the standard, the significant advantages of the ABC standard—in terms of increased clarity and consistency—will often be best served by first considering one or both of the latter two parts of the standard in resolving the employee or independent contractor question. Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903.
Unless a hiring entity establishes (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, (B) that the worker performs work that is outside the usual course of the hiring entity’s business, and (C) that the worker is customarily engaged in an independently established trade, occupation, or business, the worker should be considered an employee and the hiring business an employer under the suffer or permit to work standard in wage orders. The hiring entity’s failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an included employee, rather than an excluded independent contractor, for purposes of the wage order. This interpretation of the suffer or permit to work standard is faithful to its history and to the fundamental purpose of the wage orders and will provide greater clarity and consistency, and less opportunity for manipulation, than a test or standard that invariably requires the consideration and weighing of a significant number of disparate factors on a case-by-case basis. Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903.
Court Rejection of Borello/Ayala multifactor test
The suffer or permit to work standard applies to the question whether a worker should be considered an employee or, instead, an independent contractor. Considering the appropriate test to resolve this question under the “suffer or permit to work” definition of “employ,” the California Supreme Court has rejected the Borello/Ayala multifactor test for this purpose and has instead adopted the simpler, more structured three-part ABC test. The ABC test permits courts to look beyond labels and evaluate whether workers are truly engaged in a separate business or whether the business is being used by the employer to evade wage, tax, and other obligations. Under the ABC test, a worker is presumptively an employee, and the hiring entity bears the burden to show otherwise. The ABC test is conjunctive, and the hiring entity’s failure to establish any of the following three factors precludes a finding that the worker is an independent contractor: (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Employment Relationships, Independent Contractors
In determining whether a worker should properly be classified as a covered employee or an excluded independent contractor with deference to the purposes and intended reach of the remedial statute at issue, it is permissible to consider all of the various factors set forth in prior California cases, in Lab. Code, § 2750.5, and in out-of-state cases adopting a six-factor test. Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903.
Common Carrier Duties & Liabilities, State & Local Regulation
The ABC test is a law of general application. The ABC test does not mandate the use of employees for any business or hiring entity. Instead, the ABC test is a worker-classification test that states a general and rebuttable presumption that a worker is an employee unless the hiring entity demonstrates certain conditions. That independent owner-operator truck drivers may be incorrectly classified does not mean the ABC test prohibits motor carriers from using independent contractors. The ABC test, therefore, is not the type of law Congress intended to preempt under 49 U.S.C. § 14501(c)(1). People v. Superior Court (Cal Cartage Transportation Express, LLC), 57 Cal. App. 5th 619
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